Haute Pawn Shop

By Robert Milburn

It would seem that everyone is pawning their wares these days. Look no further than the sheer volume of reality T.V. shows, such as Pawn Stars and Hardcore Pawn, devoted to folks who hawk their dusted-off junk to the tattooed man behind the counter. Now, however, there is a pawn shop for America’s wealthiest, although the rep behind the counter is sure to be much better dressed.

Source: Suttons & Robertsons

The Suttons & Robertsons showroom.

Britain’s wood-paneled Suttons & Robertsons recently opened a flagship store in New York City’s midtown. This is not your run-of-the-mill pawn shop. The showroom of the 240 year-old company is filled with glass cases and dazzling objects. We spotted, for example, a 14-carat diamond-encrusted platinum clutch, and a pair of 118-carat Morganite earringsavailable for-sale and with prices upon request. (Neither, we were told, is because the borrower is in default. They simply are prepared to sell – at the right price.) In the back room, there is an enormous 30,000 pound safe dangling from the steel rafters, so its weight doesn’t buckle the floor.

The company secures short-term loans to wealthy individuals backed by everything from Rolex watches, Aston Martin sports cars, and priceless works of art and antiques. “We underwrite the object, not the borrower,” says Jeffrey Weiss, chief executive officer of DFC Global (ticker: DLLR), owner of several payday lenders, pawn store chains and now Suttons & Robertsons.

They are not entirely alone, of course. Everyone from U.S. Trust to Asher Edelman are in the business, in some shape or form, of lending money to cash-poor but asset-rich art collectors. But Suttons & Robertsons is different. It brings the practices of the low-end pawn market – no credit check and fast money – to the supposedly rich.

At a price, of course. To get a loan, it only takes verification of the object’s authenticity, some document signing, before a Suttons & Robertsons representative takes the object into custody, until the borrower has repaid the interest and principal. These loans are regulated by state law, so interest rates are capped at 5% a month, but Weiss says, depending on the object the average is 1.9% to 3.9% monthly. Needless to say, any “rich” person who needs to borrow money at an annual 46.8% rate is in a rather desperate spot.

DFC bought Suttons & Robertsons in 2010 for about $25 million, with the idea of rolling out the London-based brand in the U.S. and other markets. He is confident about selling the Suttons & Robertsons brand to the world, he says, because wealthy individuals, now more than ever, are buying hard assets like real estate, art, jewelry and gold. Post-financial crisis, wealthy individuals are looking for a safer haven to store their wealthy, Weiss says. Umm, yes, that’s true. But leveraging those assets for cash at almost usury lending rates rather defeats the “safe haven” aspect of the original purchase.

There is reason for Weiss’ cheerful optimism, however. Barclays research suggests that wealthy individuals worldwide hold an average of 9.6% of their total net worth in tangible assets. Meanwhile, high-net worth folks in potentially volatile countries like the United Arab Emirates, Saudi Arabia and China hold 18% in such treasures. Weiss plans to expand in the U.S. first, but Barcelona and Stockholm are soon to come, with Singapore and Mumbai on the radar thereafter. The pawn space, it appears, is fast becoming crowded, as businesses like Ultrapawn, iPawn, Pawngo and Borro come online. None, of course, have the storied history of Suttons & Robertsons, which has supposedly dealt with certain U.K. aristocrats for generations. It is perhaps best known for refusing to turn over to authorities the jewels pawned by the notorious 1930s money launderer Alexandre Stavisky.

Weiss says the firm’s typical customer are folks with “lumpy incomes,” like investment bankers who live for their hefty bonuses, or entrepreneurs that need immediate cash to finance their business’ operations or take advantage of an investment opportunity. In the past, Suttons & Robertsons has been approached for a loan to make down-payments to purchase real estate, meet unexpected tax liabilities, and, in a stressful-sounding arrangement, covering advertising fees before the secured object was sold at auction.

Suttons & Robertsons is the lender of last resort. Weiss recalls a man who was presented with a business opportunity that for one reason or another had to close immediately. Suttons & Robertsons secured a loan for $250,000 against his wife’s diamond jewelry collection. The deal closed the same day. The entrepreneur, a month or two later, secured a conventional loan, paid off the “bridge loan’s” principal and interest, and the jewelry was promptly returned to his wife.

With the cost of Suttons & Robertsons’ money approaching 50% in some cases – when wealthy folks in good standing can get a loan for around 3% from their private banks – it’s understandable why most of the objects are paid back in three-and-a-half months or so, even though New York State law dictates that these loans can be extended to about 15 months. Weiss says 30% of borrowers are repeat customers. Your guess is as good as ours whether that’s a vindication of the service’s merit or the relative desperation of the borrowers.

For items that are easily valued, like a Rolex or Patek Philippe watch, Suttons & Robertsons can wire thousands of dollars to your account within the day. A 17th Century Charles II antique chair might take a week or two for an expert to sort out its valuation. Weiss’ pitch is that the process is “safe, discreet and fast;” he goes on about how banks can’t move quickly enough, and how credit cards might have constricting limits that can be equally costly.

Should you default, of course, the object securing the loan is forfeited, so think twice before you pony-up the Picasso for fast cash. Weiss assures us that 95% of borrowers reclaim their objects, but for the few that don’t, the price is multiples higher than the stiff rate.

Add a Comment

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comment

There are 5 comments

FEBRUARY 10, 2014 3:53 P.M.

R wrote:

The "guy" that wrote t his article is an IDIOT. I love (hate) it when someone compares a pawn shop to a bank. The BANKS never "loan" their OWN money. "They" are loaning another customer's money. THe hock shop has to FIND another customer to sell any item that is defaulted. It is NOT like it is done within an hour of default all the time. when that is actually the case, that is a good thing. I guess the writer thinks the pawn shop does not have any overhead to pay for every day/week/month. After all there are no taxes, utilities, rent, insurance and GOD forbid anyone actually being paid for work. I doubt if any of the managers are getting a mega million salary like the corp execs are. The paltry 3% the shop is getting is not enough to support them. If they do NOT have retail/wholesales, they go under. It is as competitive as WalMart and Target. Profitable? Well they aint doing it for fun. yeah you guessed it. I have owned pawn shops. Pawn shops are NOT banks. They are brokers.

FEBRUARY 12, 2014 2:04 P.M.

Jake Benson wrote:

Needed a short term loan against my Rolex and stumbled upon S&R. The showroom is very impressive, but the staff is not! It is also on the ground floor...absolutely no confidentiality. Did my research and found an American pawn shop called New York Loan Company (www.newyorkloan.com), and they actually offered more money. They are on the 3rd floor of an office building on 47th, so half of Manhattan did not see me walking into a pawn shop, which was the case at S&R!

FEBRUARY 13, 2014 10:06 A.M.

H. Craig Bradley wrote:

PERCEPTION IS REALITY FOR MOST

Most people are not actually rich. Instead they appear rich. However, appearances are deceiving. Credit is how people maintain lifestyles far above their incomes. So, nobody really knows how much a person has by just looking at them or talking to neighbors. So, if they are at all envious and most people are, you may be considered rich or "having money" if you have more than they do ( which is very little actually). The real question is: " How Much ?". Unless you have $ 20-30 million or more, its real hard to feel truly rich. So, once again, perception is reality.

About Penta

Written with Barron’s wit and often contrarian perspective, Penta provides the affluent with advice on how to navigate the world of wealth management, how to make savvy acquisitions ranging from vintage watches to second homes, and how to smartly manage family dynamics.

Richard C. Morais, Penta’s editor, was Forbes magazine’s longest serving foreign correspondent, has won multiple Business Journalist Of The Year Awards, and is the author of two novels: The Hundred-Foot Journey and Buddhaland, Brooklyn. Robert Milburn is Penta’s reporter, both online and for the quarterly magazine. He reviews everything from family office regulations to obscure jazz recordings.